Our latest GCRC interview is with David Howarth, a Reader in Law at the University of Cambridge.
David has become a notable writer and speaker about the legal industry. His recent book, ‘Law as Engineering’, caught our attention as an enlightening new perspective about the role of lawyers today and in the future, especially in the light of the still unravelling impact of the economic crash in 2008 on the legal industry.
We are interested in interviewing more academics and experts on the legal industry, so if you would be interested in participating in an interview with us, please email me.
Your book ‘Law as Engineering’ discusses a transformation of legal ethics in light of the role that the legal profession had in the 2008 crash. What went wrong pre-2008 and in what way can the profession be transformed to avoid a future recurrence of what happened in 2008?
A number of things went wrong, but I would pick out three interrelated problems.
First, there was a widespread failure to accept that lawyers have some degree of responsibility for what their clients choose to do with the legal devices or instruments lawyers put together. In the book I discuss the example of the opinion letter the London firm Linklaters created for Lehman Brothers that allowed Lehman to carry out a form of regulatory arbitrage between New York and London, obscuring from the regulatory authorities the extent and nature of its liabilities. There was nothing wrong, according to the ethical codes in existence at the time, with what Linklaters did. Their legal advice was perfectly accurate and their client was entirely satisfied with the service. But no one at the time seemed to think that it would be a good idea to ask what the client might be intending to do with the opinion letter – what the client’s ‘usage plan’ was – and what the consequences for third parties might be of its carrying out that plan.
Secondly, and related to the first, there was a tendency to apply norms of behaviour rooted in litigation – for example the idea of zealous representation – to contexts where those norms have destructive effects. The whole idea of making a contract is that both sides benefit from a trade. Ideas of representation taken from the zero sum world (or in reality the negative sum world) of litigation don’t make sense in the positive sum world of transactions and end up promoting distrust, which in turn undermines the resilience of markets.
Thirdly, if lawyers have a responsibility for the consequences of what they are making, they also need to understand what they are making and what it can do if it goes wrong. I suspect that many lawyers had nowhere near a complete understanding of the instruments they were creating and instead delegated that understanding to their clients and to the economics profession, whose unswerving doctrine seemed to be that whatever the market created was safe. In engineering terms, lawyers confused product reliability with product safety.
As for how the profession can be transformed so that there can be no recurrence of 2008, I would have to say that I’m not expecting a complete transformation or the elimination of any possibility of a recurrence. That’s not how human beings operate. Reducing the risk of recurrence is the best we can realistically hope for. But I would argue for radical change in how lawyers approach the ethics of lawyering, giving priority to the ethical requirements of transactional law over those of litigation. That should include adopting an equivalent of the basic ethical stance of engineers, that the profession has an overriding obligation to prevent harm to the public, and even, although this is far too radical for most lawyers I talk to, an obligation to promote the welfare of the public. In the financial services sector specifically, the adoption of either principle would mean, for example, that lawyers should themselves understand what they are making and what the risks are. At least for that sector, the idea that people go to Law School because they are no good at mathematics should no longer be acceptable.
Unfortunately we couldn’t attend ReInvent in New York, but Ron Friedmann noted that you described that much of the work that lawyers do is creating documents that are useful to their clients. He quotes you as saying that lawyers create “artificial social structures”. What do you mean by “artificial social structures”? Artificial appears a loaded term – is this work artificial in a negative sense?
Interesting that you might think that, but no, quite the opposite. It is meant entirely positively, in the sense that engineers create ‘artificial’ physical structures, which is to say structures created by people rather than by nature. It’s the same sense as that promoted by Herbert Simon, the polymath social scientist and computer scientist who won the Nobel Prize for economics, in his great book ‘The Sciences of the Artificial’. But I also say in my book that one of the reasons lawyers are unpopular is that some people object to the whole idea of attempting consciously to create social structure, as opposed to living our lives entirely within the bounds of the habitual or the taken-for-granted. I’m not one of those people!
How important is the role of the in-house lawyer in terms of creating these ‘artificial social structures’ for their client? Or if the answer to the previous question did indeed state that ‘artificial’ is used in a negative sense here, to what extent is the role of the in-house lawyer intended toward seeing through the artificiality of these social structures?
Immensely important. Although I’ve never been an in-house lawyer, I know some very well indeed, and it strikes me that a great amount of their time seems to be taken up in creating proper processes and safeguarding them from abuse, misuse and general wear and tear.
Ron also noted that you said that the law ‘changes the social world for the client’. What does this mean?
At its simplest it just means that the point of a contract, a trust, a will or a lease is to change something for the better in the real life of the client, which usually means changes in some way the client relates to other people. The contrast I had in mind was with those who say that since lawyers can’t guarantee changes in the real world as lived by the client, but only changes in the way the law applies to the client, lawyers shouldn’t worry about those real world objectives. It’s an attitude sometimes found in those who draft statutes and regulations and in some parts of academic law. But my view is that if lawyers aren’t interested in changing the real world situation of their clients, why should clients pay them for their work?